Indiana Medicaid’s Perspective of Assets & Income
The Medicaid program uses the term resources to mean assets. The Medicaid program distinguishes resources and income in determining eligibility and calculating the amount that a Medicaid recipient must contribute to medical expenses. The Indiana Partnership policy asset disregard applies to resources. Whether a resource or income is counted, and how it affects eligibility, depends on many factors. The information below is general in nature. It is intended to give examples of certain types of resources and income. There are many other types of resources and income that might affect Medicaid eligibility. The listing of an item below does not necessarily mean that it will count toward Medicaid eligibility; depending on an individual’s circumstances, some resources and income might be exempt or unavailable for Medicaid purposes.
- Annuities: Prior to being annuitized, the balance is a resource. After it is annuitized, the payments are income in the month received.** Withdrawals prior to annuitization are considered resources.
- Bank Accounts and Certificates of Deposit: The balance on the *first day of the month is a resource. Interest earned is income in the month received.
- IRAs: Balance in the account on the *first day of the month (minus any penalty the person would incur for early withdrawal if under age 59 1/2) is a resource. Dividends and interest earned is income in the month received. Withdrawals are considered resources.
- Life Insurance with Cash Value: The cash value is considered a resource.
- Mutual Funds: Balance in the account on the *first day of the month is a resource. Dividends or interest are income in the month received. Capital gains distributions to the fund’s shareholders are income. Shares that are redeemed are resources.
- Retirement Plans: Whether it is considered a resource or income depends upon multiple factors. Each retirement plan would need to be reviewed and considered separately.
- Stocks and Bonds: Balance on the *first day of the month, based on current share prices, is a resource. Dividends are income during the month received. Shares that are redeemed are considered resources.
*First day of the month – Medicaid is concerned about the applicant’s financial picture as of the first moment of the first day of the month in which the applicant would be receiving benefits. For more information about how the date of application affects the date benefits begin, contact your local office of Family and Children.
**Income earned from resources is counted as income regardless of whether it is paid directly to the recipient or reinvested into the resource.
The information below is an abbreviated overview of individual income taken into account for eligibility under Medicaid. For married couples, both incomes are considered when determining eligibility. When the income is distributed jointly to both spouses, it is assumed that each spouse shares an equal interest. Actual income contributions to the cost of care for the Medicaid eligible spouse, however, depend on the personal income of each spouse.
1. What is Income?
Total monthly income is the gross amount received by the individual or generated by his/her assets. This includes but is not limited to:
- Social Security
- Income from Annuities/IRAs:
Some exceptions and items of note:
• Series E/EE Savings Bonds: Interest is NOT considered income.
• I Bonds: Interest is NOT considered income.
• Zero Coupon Bonds: Upon maturity, Medicaid considers interest as income.
• Capital Gains: Capital gains (e.g., from the sale of mutual fund or real estate) are considered an increase in the value of the resource and are exempt under Medicaid Extended Coverage.*Note, however, that capital gain distributions (e.g., from mutual funds), annotated on Internal Revenue Form 1099-DIV, are considered unearned income.
*Refer to #3, on how payments from annuities and IRAs are treated.
- Capital Appreciation: This is NOT considered income.
- Life Insurance: When a person becomes the beneficiary of benefits under a life insurance policy, the monies are considered income in the month in which they are received. Dividends from life insurance are NOT considered income, but interest on dividends from a life insurance policy IS considered income.
- Spousal income or“OTHERWISE AVAILABLE INCOME”: The income of the spouse at home may be adjusted by certain permissible deductions. The net result of this calculation is called “otherwise available income”. Although other specialized deductions exist, the most common permissible deductions from the spouse at home’s gross income are:
o Health insurance premiums (including premiums for long term care insurance);
o Incapacitated adult/child care costs (actual); and
o Court ordered support (Paid Out).
2. How is income treated in the eligibility determination process?
Income eligibility for Medicaid is determined on a monthly basis. Because of this, Medicaid differentiates between periodic income and non-periodic income. Periodic income is received on a regular schedule, for example, once a month, once a quarter, once a year, etc. Some examples of periodic income are pensions, annuities, and IRA withdrawals. Non-periodic income is income received on an irregular schedule such as an inheritance, or an award.
Non-periodic income is counted in the month in which become available. After that, it is considered a resource. This means that if the individual were to receive monies that would cause his/her income to exceed the cost of his/her care, he/she would be ineligible for Medicaid for that month only, regardless of whether the money is all spent by the end of the month. For example, needed care is $5,000/month and a CD matures, when the CD’s interest is combined with regular monthly income, it gives the individual $7,000 that month. In this instance, the individual would be ineligible for Medicaid in that month but eligible in the following month even if he/she merely deposits the extra amount.
Periodic income is applied on a monthly basis regardless of how often it is received during the year. For example, if an annuity paid out once a year, the amount paid would be divided by twelve (12) to establish total monthly income.
3. Annuities and IRAs: How are payments treated?
All monies received on a periodic basis from an annuity or IRA, whether received monthly, quarterly, semi-annually, or annually, are considered income regardless of whether such monies represent a payout of interest or principal. However, if the total principal were to be withdrawn in a lump sum, the money would be considered a resource.
4. May I transfer income?
When the transfer or conversion of protected resources results in the transfer or loss of income that was earned by those protected assets, no transfer penalty shall apply. However, income transfer other than through the transfer of income attached to protected resources may result in penalties.